9911796707
TMI Blog2000 (11) TMI 117X X X X Extracts X X X X X X X X Extracts X X X X ..... nature and not of a capital nature and that the same is allowable deduction from the taxable income ?" This reference pertains to the assessment year 1974-75. Mr. Anil Bhan, senior Central Government standing counsel, appears for the Revenue. None appears for the assessee. The material facts of the case, briefly stated, are as follows. The Municipal Committee, Srinagar, constructed a number of shops at Srinagar for the purpose of giving them on lease. It conducted an auction for that purpose. The assessee took one of the shops, being shop No. 9, on lease in the auction. According to the terms of the auction, the assessee was required to pay Rs. 63,000 as "nazrana" in two annual instalments. According to the terms of the lease, the leas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ealed to the Tribunal. Before the Tribunal, the assessee contended that it did not acquire any capital asset or a benefit of enduring nature by taking the premises on lease. It was pointed out that even according to the terms of the lease, the tenancy could be forfeited as provided under clause 5 thereof. The assessee maintained that the payment of Rs. 31,500 was a condition for entering into the agreement for lease without which the lease could not be taken and that, as in the case of rent, the payment of Rs. 31,500 was also incurred for the purpose of carrying on its business, It was submitted before the Tribunal by the assessee that as taking of the shop on lease was necessary for carrying on his business and so also the compliance with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rned counsel for the Revenue and carefully considered the facts of the case. It is clear from the facts of the case that the payment of the sum of Rs. 63,000 in two annual instalments was made for acquisition of the 17 year lease of the shop. The question is whether that right is a capital asset. The answer obviously has to be in the affirmative in view of a catena of decisions of the Supreme Court and the Privy Council. It is well-settled that the premium paid by the lessee for the grant of a lease, whether payable in lump sum or in instalments over the whole period of the lease along with the rent, is normally capital expenditure. The lessee purchases the term of the lease for the premium. As observed by Greene M. R. in Henriksen (Inspect ..... X X X X Extracts X X X X X X X X Extracts X X X X
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